Chancellor Angela Merkel and Vice Chancellor Sigmar Gabriel have agreed not to implement a capacity market, which would see companies paid to ensure there is enough power generation to meet peak demand, as part of Germany’s transition to renewable energy sources.
Ms. Merkel also opposes subsidiaries for conventional power stations to keep producing electricity during the transition period, Handelsblatt has learned from sources close to the government. There are, however, moves to make an exception for a highly modern gas-fired power plant in power-hungry but green-energy deficient Bavaria.
Germany’s energy transition will see a switch to electricity production mainly from sustainable sources such as wind, solar and biomass. The move is opposed by companies who fear a loss of profit from conventional energy and the closure of power plants; politicians concerned about job losses and critics say conventional energy will be needed as a backup to ensure reliability of supply.
Ms. Merkel was already skeptical about the possibility of a capacity market at the start of the year but had not yet stated whether she would oppose it politically.
“The ministry hasn’t said anything about whether and how to fill the capacity shortfalls that will be created in the move away from nuclear energy.”
Earlier this year, energy companies such as E.ON and RWE called for support for power capacity markets to ensure there is enough backup electricity available for times when renewable sources cannot supply enough power to the grid.
Power companies which generate electricity from fossil fuels face growing difficulties as more and more energy is produced in Germany from renewable sources. The renewable energy law requires that by 2050, 80 percent of energy should be produced from solar, wind and biomass. Government subsidies for renewable energy have led to an excess of electricity on the market cutting wholesale energy prices by half and eroding the profits of major power providers.
Germany’s power network agency, the Bundesnetzagentur, has received 47 applications for the closure of power stations, most of which are located in southern Germany. For this reason, there have been particularly strong calls from Bavaria’s premier, Horst Seehofer, for a capacity market. According to information obtained by Handelsblatt, there may be a special arrangement for Bavaria.
Sources close to the Bavarian state government, controlled by the Christian Social Union, a sister party to Ms. Merkel’s ruling Christian Democratic Union, said there are moves to create a special ruling for the highly modern gas-fired power plant at Irsching to finance the plant over and above its operating costs. E.ON operates the plant and had threatened repeatedly to close it, a move that would lead to difficulties in ensuring a reliable supply of electricity in Bavaria.
Mr. Gabriel, economics minister and leader of the Social Democratic Party that is the junior partner in the ruling right-left coalition, had proposed creating a power reserve. According to his plan, the energy agency would identify and run the reserve power stations but they would continue to be owned by the power providers.
Time is running out for an agreement as Mr. Gabriel wants a deal with the CDU on basic principles for the new electricity market by June.
There have been several difficulties, most recently when energy experts from the CDU called off a closed conference with Mr. Gabriel because of his plans, published in a strategy paper, to introduce a climate levy on coal power plants. The proposal would have required coal-fired power plants older than 20 years in 2020 to buy CO2 reduction certificates. CDU politicians have sent 150 questions about the paper and they remain concerned.
“The ministry hasn’t said anything about whether and how to fill the capacity shortfalls that will be created in the move away from nuclear energy,” said Michael Fuchs, the CDU’s deputy parliamentary group leader. On this basis, it is impossible to have a discussion, he said.